Maker's Mark or an Act of Deception? Globalisation and the Viability of Using Country of Origin as a Selling Proposition
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Carpe Diem, The Australian Journal of Business & Informatics
Volume 3, No. 1, 2007
Maker’s Mark or an Act of Deception?
Globalisation and the Viability of Using Country of Origin as a
Selling Proposition
By David Marcus and Jessica Salinger
University of Sydney
1. Defining COO
2. Conspicuous Consumption and its effect on COO
3. The Significance of COO in the Decision-Making Process
4. Variations in the Effectiveness of COO
5. Why Some Countries ‘Do it Better'
6. Globalisation and COO’s Diminishing Significance
7. Conclusion: A Contingent Model for successful use of COO
8. Bibliography
9. Postscript – The Limitations
9.1 Subjective Nature of COO
9.2 Social Conditioning
9.3 Context
End Note
Introduction
The concept of ‘country of origin’ has consistently provided a formidable and reliable reference
point for the consumer when it comes to product selection, in likelihood due to the fact that it is
synonymous with such concepts as quality, craftsmanship and expertise. Despite the dilution
and convergence of markets, it is ironic that this concept retains a strong and pronounced role
in determining product and brand selection in same product categories. This paper explores
whether globalisation has reduced the significance of the phenomenon of COO effects in
marketing, and whether the tension created by the two forces will mean that COO is a creature
of regionalism, or whether it will continue to provide a relevant and human dimension to
characterisation of products, and in what situations it will be invoked as a selling proposition.
The paper also examines the historical development of the concept of clustering and how COO
can be used effectively in the Information Age.
The first part deals with the definition of Country of Origin (COO), conspicuous consumption, the
decision-making process, and aspects which influence the effectiveness of COO. In analysing 6
journal articles, listed in the Bibliography, emphasis will be placed on categorising findings
based on different thematic issues considered in the articles.
The second part argues that whilst some recent companies have based their success on factors
other than COO, the phenomenon of clustering, as articulated by Porter, has remained a
significant aspect of competition and markets. Lastly a postscript points out the limitations of
COO research to date.
1. Defining COO
COO as a process
Al-Sulatiti and Baker (1998) argue that in today’s robust and cosmopolitan marketplace, any
attempt to define the COO of products can be a complicated task. Considering that productCarpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 inputs originate from a range of countries, ‘country of origin’ becomes misleading as it no longer embodies a closed and exclusive process encapsulated in one country. The author acknowledges that component sourcing from multiple destinations has blurred the accuracy of “made in” labels meaning that COO now represents “the country of assembly” or “the final point of manufacture” usually taking place at the headquarters of a company. COO as a stereotype In contrast to Al-Sulatiti and Baker (1998) definition of COO as a process consisting of various stages from manufacture to sale, a different approach to defining COO was taken by Sohail (2005), who argues that in certain circumstances COO may act as a source of country stereotyping, directly affecting consumer’s attitudes towards the brand instead of through attribute ratings. However, such an approach is also consistent with Al-Sulatiti and Baker (1998) findings since it also acknowledges that COO effects can take the form of “intangible barriers to enter new markets in the form of negative consumer bias toward imported products.” In this sense, it could be acknowledged that both approaches are viable since managers need to consider the history of category association before using COO to raise consumer awareness of their products. If the country’s product history is negative then it may be preferable to avoid COO in brand programming . Although Al-Sulatiti and Baker (1998) present a narrower definition pertaining to manufacture and assembly, such an approach is just as valuable as the practical stereotyped view of COO. Since this approach acknowledges the fundamental reality that COO historically represented a local production process, it may currently represent assembling, re-branding, or fusing of components not directly associated to the COO. Considering offshore production, this highlights the concern that the affiliation of certain products with their COO may breach their claim to COO. 2. Conspicuous Consumption and its effect on COO Piron’s research (2000) establishes a further dimension to the debate on COO since it highlights the positive association between purchasing risk and the emphasis placed on COO. This phenomenon is attributed to the notion that high involvement association in purchasing decisions leads to a more pronounced COO, as consumers consider a variety of features to ensure the value of their purchase. Public v. Private Consumption Among the many factors that influence the level of significance attributed to COO in product selection, is whether the product is intended for conspicuous consumption. Piron (2000) argues that for consumption to be conspicuous, it must become “a social event, publicly witnessed by other consumers.” This distinction between the purchase of private and public products determines the degree of social risk, hence allowing COO to play a more prominent role in the final decision. Since COO may define the image the consumer wishes to express, it means that the COO must be congruent with the personality and self-perception of the consumer. Piron (2000) maintains that there is a connection between COO and a consumer’s self-image and its expression in the public eye. Luxury v. Necessity Products Piron’s findings suggest that when purchasing luxury products COO has a stronger effect than
Carpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 price in product quality assessment. As luxury items involve greater monetary risk it generally equates to a higher degree of involvement in product selection. However, because necessity items command less risk there is less customer involvement and hence COO plays a less significant role. 3. The Significance of COO in the Decision-Making Process COO & Pre-Trial Perceptions Chiou (2003) presents a competing hypothesis, maintaining that the major predictor of COO effects is not its purpose, but rather the degree of interaction between a product and consumer. In most purchasing situations where consumers are presented with the opportunity for a post purchase test, it is questionable whether the effect of COO on pre trial perceptions will remain after trial . Familiarity Chiou (2003) also argues that increased product market familiarity results in increased product market expertise. Unlike Piron (2000) who looks at the purpose of a particular product, Chiou’s approach is more substantive since it acknowledges that COO effects do not occur independently of the buyer decision process. Thus, COO will play a role in the decision if it is something that is familiar and positive in the mind of the consumer at the time of purchase. 4. Variations in the Effectiveness of COO Culture Gurhan-Canli and Maheswaran (2000) argue that COO effects vary across countries and may be caused by culture-specific factors that can be measured by Hofstede’s framework. Individualism v. Collectivism measures the extent to which people within a society are either integrated into strong, cohesive groups or conversely where ties between persons are loose. Lo (2004) argues that the greater the in-group identification, the greater the social value allocation in favour of that group. This can be observed as one member’s purchase can be adopted by others in the group. In-group orientation operates on a local level, where consumers resort to nationalism and buy products originating from their country. Thus a fairly weak positive association between collectivist cultures and an emphasis on COO can be extrapolated. With the Masculinity v. Femininity dimension, a masculine culture is recognised when the dominant values in society include assertiveness, the acquisition of money and a focus on caring for others and the quality of life. A weak association can be established between a materialistic masculine society, where quality and COO play the most significant role, in comparison to a feminine society where product consumption is minimised and emphasis is on environmentalism and product functionality as opposed to image. With the third dimension, High and Low Uncertainty Avoidance indicates the extent to which a society feels threatened by uncertain and ambiguous situations and hence attempts to avoid them through providing greater assurance in their personal and business lives. If a society has high uncertainty avoidance, countries which are culturally different would be viewed with suspicion, and their products would not be purchased so as to reduce the perceived threat by the values and ideas of other cultures. Given the pace of globalisation, it is anticipated that countries epitomising high uncertainty avoidance will be challenged, as cultures become
Carpe Diem, The Australian Journal of Business & Informatics
Volume 3, No. 1, 2007
intermeshed and transparent.
With High Power Distance v. Low Power Distance, power distance is the extent to which a
society accepts the unequal distribution of power in organisations. Citizens in a high power
distance society may place emphasis on COO as segregating societal differences and defining
different social structures.
Demographics
Sadiq (2005) argues that other factors influence the effectiveness of COO such as consumer
demographics :
• Older consumers and females have been found to provide higher ratings for foreign
products
• Those with college educations viewed foreign products more positively
Once again, whilst it may be true that educated consumers are less likely to fear foreigners, this
should be considered in conjunction with the argument of Gurhan-Canli and Maheswaran
(2000) that groups with low uncertainty avoidance utilise COO since they are likely to take risks.
However, Chiou’s (2003) argument warns that cautious should be exercised when categorising.
Proximity
Sadiq (2005) also proposes that the proximity of the sourcing country to the importing country,
in physical and cultural terms, is influential on consumer perceptions . Closer proximity
stimulates more favourable perceptions for that country’s products which are similar in
economic and political realms. . The concept of proximity may be explained in light of Gurhan-
Canli (2000) ideas, since the greater distance (geographically, economically and culturally),
equates to a higher level of uncertainty avoidance.
5. Why Some Countries ‘Do it Better’
The development of COO effects has become so embedded in the creation of brands and
products that it is possible to say that regardless of how effective the globalisation process is,
COO effects will remain as a constant characteristic in global marketing. Indeed, COO can be
described as a phenomenon due to the fact that it finds substance in Porter’s (1998) findings on
‘clustering’. Clustering is premised upon geographic concentrations of product success gained
from local knowledge, relationships and motivation that distant product rivals cannot match.
Porter (1998) maintains that cluster businesses affect competition in 3 ways by increasing the
productivity of companies based in the area, driving the direction and pace of innovation and
stimulating the formation of new businesses which expand and strengthen the cluster.
Based on this idea that clusters are an evolutionary phenomenon resulting in specialised
expertise (e.g. Italian shoes), it could be argued that once a cluster forms, a self-reinforcing
cycle establishes to promote its growth, such that local institutions become supportive and
foreign locations simply cannot compete with such a high level of expertise. This seems to
explain why COO is a continuing global marketing phenomenon which cannot be ignored or
disassociated from perceptions of brands and products attributes. The assumption is that COO
continues to play an important role since some countries have established clusters and are able
to market a certain good or service in a way which transcends the efforts of any other foreign
country. It is this very characteristic of clustering and its ‘self-reinforcing’ nature which explainsCarpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 why some countries are able to make things ‘so much better’. 6. Globalisation and COO’s Diminishing Significance? 6.1 Reality of Globalisation An alternative argument as to COO effects, in conjunction with globalisation is that COO is assuming a less important role. The basis of this argument is premised on the notion that the conceptual use of COO in product marketing is flawed. This is evident as a product can source its inputs and processes from various countries. Consumers are becoming conscious that COO can be misleading and have no real value in product assessment, since cheap labour in developing countries is a reality inevitably forcing products to be assembled offshore. Therefore consumers are presented with other aspects to evaluate products including elements such as ecological sustainability, physical features, augmented services, and technological features. 7. Conclusion: A Contingent Model for successful use of COO From one perspective, it could be argued that COO is merely a composition of stereotypes which have been crystallised by popular culture and reinforced by simplistic experiences by customers. From one perspective, Porter’s (1998) highly reputable framework encapsulating cluster formation indicates a very real and formidable link between location and product- category. This paper reveals that it is a combination of true core competencies possessed by a region as well as the role of popular culture immortalising such images which has created a climate where COO claims will have more legitimacy in some instances and not in others. The findings reveal that COO will not be appropriate in the selling of all products. Only countries with a clear and recognised competency in the product category, whether established through popular culture or through the phenomenon of clustering (most likely it will be attributable to both) as a historical or potentially emerging competency, should emphasise COO as a criteria which can be invoked by the buyer in the buying process. If there is no such historical or potential association between the product-category and COO, then a company would be better off highlighting other criteria such as features and benefits in order to attract customers. Far from adding to brand equity, if such companies were to use COO for their product categories, they would be creating negative images and associations with their products . 8. Bibliography Al-Sulatiti K, Baker M, “COOeffects: A Literature Review,” Marketing Intelligence and Planning, Bradford (1998) vol. 16 (3), p 150(Article 1) Balabanis and Diamantopoulos, “Domestic Country Bias, Country-Of-Origin Effects, and Consumer Ethnocentrism: A Multidimensional Unfolding Approach,” Academy of Marketing Science,Winter 2004; 32; 1 Beverland M. Lindgreen A, “Using COO in Strategy: The importance of context and strategic action,” Journal of Brand Management, Nov 2002 10 (2), p149 Chen, Warden, and Chang, “Is English A Brand: The Impact of English Language Learning on Product Evaluation,” The Journal of Langiage For International Business, 2006; 17; 1 Chiou, Jyhshen; “The impact of COOon pretrial and posttrial product evaluations: The
Carpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 moderating effect on consumer expertise”, Psychology & Marketing; Hoboken; October 2003, Vol 20, Iss 10; (Article 4) Gurhan-Canli Z and Maheswaran D, “Cultural Variations in COOEffects,” Journal of Marketing Research: Aug (2000) 37 (3) (Article 5) Hsin Hsin Lo, “The Moderation of belief in Idealism on Group Identity and In-Group Favoratism,,” Department of Business Administration, National Defense University http://www.issp.sinica.edu.tw/~issp/psychology/pdf/2-A-2- 2.pdf#search='triandis,%20ingroup,%20outgroup' Loussaief L (2001), “The consumer sensitivity to the perceived national origin of (PNO) brands”, in Rahtz D and McDonagh P (Eds), “Globalisation and Equity; Macromarketing Contribtions: Proceedings of the 26th Annual Macromarketing Conference”, College of William and Mary, Williamsburg, Virginia, pp70-73 Mackay H, “Turning Point: Australians Choosing Their Future,” Pan Macmillan (1999), (Supporting Resource 2) Papadopoulos, N (1993); “What product and country images are and are not” in Papadopoulos N and Heslop L A (Eds) “Product Country Images; Impact and Role in International Marketing”, Haworth Press, London, pp3-38). Piron F, “Consumers’ perceptions of the country-of-origin effect on purchasing intentions of (in)conspicuous products,” The Journal of Consumer Marketing (2000) 17 (4) p308 (Article 3) Porter Michael E, Clusters and New Economics of Competition,” Harvard Business Review, November- December 1998 (Supporting Resource 1) Porter Michael E, Clusters and New Economics of Competition,” Harvard Business Review, November- December 1998. Sohail, Sadiq M; “Malaysian Consumers’ Evaluation of Products Made in Germany: The COO Effect”; Asia Pacific Journal of Marketing and Logistics; 2005; 17, 1; ABI/INFORM Global p 89 (Article 2) 9. Postscript – The Limitations 9.1 Subjective Nature of COO Although much research has been conducted on the phenomenon of COO, much of it remains contradictory in nature. For instance, Papadopoulos (1993) acknowledged that not all consumers making product evaluations use COO, and indeed nor do they use it in the same way. Such a reality poses considerable challenges to the findings of this paper, since it suggests that there can rarely be a framework which will totally encapsulate the process and considerations which will impact on how COO will be used: if consumers do not use COO in the same way this suggests that use of COO is essentially a very subjective process. The subjectivity of COO and the fact that there can be no modernist construction of the process of the use of COO suggests that: • It is influenced by social conditioning • Only weak associations based on cultural, demographic, product-based or other
Carpe Diem, The Australian Journal of Business & Informatics
Volume 3, No. 1, 2007
parameters can be made
• The use of COO is an internalised phenomenon- since the reality of its significance is
not an objective and social construct, but is a personal reality that is given shape and
meaning by each individual.
9.2 Social Conditioning
Beverland and Lindgreen (2002) acknowledge that personal background and socialisation affect
consumer receptions of COO. Fairly weak associations can be established. For instance, COO
is stronger among the elderly and the politically conservative.
9.3 Context
Because the impact of COO on purchase choice and brand evaluation is contextually driven
(2002), it must always be used with caution. Beverland and Lindgreen argue that perceptions of
COO will always change over time when consumers have acquired more knowledge about the
country, when the marketing practices supporting the product are improved, or when the quality
of the product is enhanced.
Additionally it has been highlighted that few conclusions and implications can be drawn from the
existing COO research, as to developing country consumers. Most of the studies have:
• Been conducted in the USA with foreign students on the assumption that foreign
students in the USA behave similarly to the broader populations of their respective
countries.
• Not been conducted outside the USA and if so it has been in other industrialised
countries and Eastern European countries .
End Notes
Al-Sulatiti K, Baker M, “COO effects: A Literature Review,” Marketing Intelligence and Planning,
Bradford (1998) vol. 16 (3), p 150
Al-Sulatiti K, Baker M, “COO effects: A Literature Review,” Marketing Intelligence and Planning,
Bradford (1998) vol. 16 (3), p 150
Our survey revealed similar findings with responders finding 6 different definitions for COO, see
appendix
Sohail, Sadiq M; “Malaysian Consumers’ Evaluation of Products Made in Germany: The COO
Effect”; Asia Pacific Journal of Marketing and Logistics; 2005; 17, 1; ABI/INFORM Global p 89
Al-Sulatiti K, Baker M, “COO effects: A Literature Review,” Marketing Intelligence and Planning,
Bradford (1998) vol. 16 (3), p 150
Op cit; Note 3
Piron F, “Consumers’ perceptions of the country-of-origin effect on purchasing intentions of
(in)conspicuous products,” The Journal of Consumer Marketing (2000) 17 (4) p308
Piron F, “Consumers’ perceptions of the country-of-origin effect on purchasing intentions of
(in)conspicuous products,” The Journal of Consumer Marketing (2000) 17 (4) p308Carpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 Piron F, “Consumers’ perceptions of the country-of-origin effect on purchasing intentions of (in)conspicuous products,” The Journal of Consumer Marketing (2000) 17 (4) p308 Our survey revealed that when buying groceries, COO was only important for 30% of responders, whilst when buying a car, COO was important to 100% of responders Piron F, “Consumers’ perceptions of the country-of-country effect on purchasing intentions of (in)conspicuous products,” The Journal of Consumer Marketing (2000) 17 (4) p308 Ibid at 308 Ibid; our survey question on handbags and wallets revealed that COO was important to 90% of respondents, outscoring the importance attributed to Design – which was only 70%: see appendix Mackay H, “Turning Point: Australians Choosing Their Future,” Pan Macmillan (1999), p182 Refer to appendix for matrix approach to public/ private, luxury/ necessity items Chiou, Jyhshen; “The impact of COO on pretrial and posttrial product evaluations: The moderating effect on consumer expertise”, Psychology & Marketing; Hoboken; October 2003, Vol 20, Iss 10; p 935. Ibid Gurhan-Canli Z and Maheswaran D, “Cultural Variations in COO Effects,” Journal of Marketing Research: Aug (2000) 37 (3) AT 609 Hsin Hsin Lo, “The Moderation of belief in Idealism on Group Identity and In-Group Favoratism,,” Department of Business Administration, National Defense University For instance, in Mexico there is a high power distance and upper classes tend to pay more attention to COO in purchase decisions to reflect their social status. Op cit; Note 7 Sohail,, Sadiq M; “Malaysian Consumers’ Evaluation of Products Made in Germany: The COO Effect”; Asia Pacific Journal of Marketing and Logistics; 2005; 17, 1; ABI/INFORM Global p 92 Sohail, Sadiq M; “Malaysian Consumers’ Evaluation of Products Made in Germany: The COO Effect”; Asia Pacific Journal of Marketing and Logistics; 2005; 17, 1; ABI/INFORM Global p 92 For instance, a study conducted in 1996 found that European customers choose Germany as the quality leader, whilst in Asia, Japan emerges as the quality leader. See Gurhan-Canli Z and Maheswaran D, “Cultural Variations in COO Effects,” Journal of Marketing Research: Aug (2000) 37 (3) AT 609; Bilkey and Nes 1982 Sohail, Sadiq M; “Malaysian Consumers’ Evaluation of Products Made in Germany: The COO Effect”; Asia Pacific Journal of Marketing and Logistics; 2005; 17, 1; ABI/INFORM Global p 92 Porter Michael E, Clusters and New Economics of Competition,” Harvard Business Review, November- December 1998.
Carpe Diem, The Australian Journal of Business & Informatics Volume 3, No. 1, 2007 Several variables for assessing a product, besides COO, were identified for various product scenarios in our survey, refer to appendix e.g. Japanese wine producers would not gain from highlighting COO, given the lack of historical clustering of wineries in that region, however a Japanese producer of stereo systems would gain from COO since there is a formidable reputation for electronics in this region Beverland M. Lindgreen A, “Using COOin Strategy: The importance of context and strategic action,” Journal of Brand Management, Nov 2002 10 (2), p149 Op cit; Note 7 AUTHOR BIOGRAPHIES David Marcus David Marcus is a combined Commerce/ Law student at the University of Sydney and graduated from his Bachelor of Commerce (majoring in Marketing) in 2007. David is a Paralegal in the Employee Relations division at Freehills, a pre-eminent Australian law firm, where he assists lawyers in advices and research involving employment issues. Recently, David has enjoyed his involvement with a Mentoring Program for disadvantaged students and volunteering at the Matthew Talbot Hostel for Homeless Men, and is motivated by the role the commercial world can play in addressing social problems. David would like to complement his achievements with an exchange program in 2008, and looks forward to his career as a corporate lawyer. Jess Salinger Jess Salinger holds a Bachelor of Commerce (Marketing Major) which was completed in November 2006. Jess is currently engaged in a Bachelor of Laws with an aim to complete the degree at the end of 2008. She is currently a paralegal and would like to pursue a career in Law and integrate her Commerce degree with her practise. She is also considering doing some travelling around Europe in the near future. The authors would like to thank their families and Al Marshall of the University of Sydney for their support.
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